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Diamond v. State Farm Mutual Automobile Insurance Co.

March 31, 2010



This case came before the undersigned on June 19, 2009, for hearing of defendant State Farm's May 7, 2009 motion to dismiss the second cause of action of plaintiff's complaint, alleging professional negligence, pursuant to Rule 12(b)(6) of the Federal Rule of Civil Procedure (Doc. No. 14) and plaintiff's May 15, 2009 motion to remand this action to the Sacramento County Superior Court (Doc. No. 18). Plaintiff Arthur Diamond, proceeding pro se, appeared on his own behalf. Robert S. McLay appeared as counsel for moving defendant State Farm. Timothy Lord appeared as counsel for defendant Mediterranean Shipping. After hearing the parties' arguments, the motions were taken under submission.

For the reasons set forth below, the undersigned will recommend that plaintiff's motion for remand be granted and that this action be remanded back to the Sacramento County Superior Court. In light of that recommendation, based on the lack of federal jurisdiction, the undersigned will also recommend that defendant State Farm's motion to dismiss plaintiff's second cause of action be denied as being rendered moot if these findings and recommendations are adopted with respect to the motion to remand. Nonetheless, recognizing that the assigned district judge may not adopt the recommendation with respect to remand, the undersigned will address the merits of the motion to dismiss so that this action may proceed forward in either event.


In his complaint, plaintiff alleges as follows. In September of 2006 he owned a 1999 Mercedes Benz which he insured with defendant State Farm. (Decl. of Timothy R. Lord re Notice of Removal (Doc. No. 2), Ex. A (hereinafter "Compl.") at 3.) Under that insurance policy, the contents of the vehicle were also covered. (Id.) A man posing as a shipping agent agreed to arrange for transport of plaintiff's vehicle and its contents to Uganda.*fn1 (Id.) Soon after releasing his vehicle and its contents to the man, plaintiff realized that he was the victim of a scam. (Id.) Plaintiff reported the theft to the Elk Grove Police Department and to defendant State Farm. (Id.) By October of 2006 police informed plaintiff and defendant State Farm that the stolen vehicle appeared to be in the possession of defendant Mediterranean Shipping in Houston, Texas but that Mediterranean was not cooperating in the investigation nor were they identifying who had delivered the vehicle and its contents for shipment. (Id.) Following additional efforts by plaintiff in October of 2006, defendant Mediterranean eventually confirmed that among the contents of one of its containers bound for Tanzania, not Uganda, was a vehicle fitting the description of plaintiff's Mercedes Benz. (Id. at 4.) However, Mediterranean indicated that it would release the container only to the individual who produced a bill of lading for the container and refused to identify the persons who had arranged for the shipment despite being informed that the vehicle had been reported stolen. (Id.) In the meantime, defendant State Farm continued to collect monthly premium payments from plaintiff while at the same time taking the position that the loss of the vehicle under these circumstances did not constitute a theft and that since the vehicle had now been transported outside of the United States, they were no longer liable under the auto policy for any loss suffered. (Id. at 5.) In addition, defendant State Farm claimed that the policy did not cover items inside the stolen vehicle, at least in part because the initial police report regarding the theft did not list those items. (Id.) Later, representatives of defendant State Farm advised plaintiff that his vehicle and its contents had been located at a Mediterranean container yard in Tanzania but refused to take action to recover the vehicle. (Id.) Representatives of defendant Mediterranean refused to cooperate with INTERPOL in recovering plaintiff's vehicle from the yard in Tanzania. (Id. at 6.) As a result, plaintiff lost his vehicle and all of its contents (electronic equipment, home appliances, clothing and other items) with a total value of over $186,000 and suffered the infliction of emotional distress. (Id. at 6-8.)

Based on these allegations plaintiff has asserted the following causes of action: (1) breach of contract against defendant State Farm; (2) professional negligence against defendant State Farm and Mediterranean; (3) causing financial loss by acting in bad faith against defendants State Farm and Mediterranean; and (4) intentional infliction of emotional distress and unjust enrichment against defendants State Farm and Mediterranean. (Id. at 8-23.) Plaintiff seeks an award of damages in excess of $276,000 with interest along with the recovery of costs and attorney fees. (Id. at 23.)

Plaintiff filed his complaint in the Sacramento County Superior Court on January 12, 2009. On April 21, 2009, defendant Mediterranean removed the action to federal court pursuant to 28 U.S.C. §§ 1441(a) and 1446. (Doc. No. 1.)*fn2 Mediterranean asserted that removal was appropriate because this court had federal question jurisdiction over this action pursuant to 28 U.S.C. § 1331. (Id. at 3.) Specifically, defendant Mediterranean contended that plaintiff Diamond had contracted for the transportation by sea of his property to Uganda and had sued Mediterranean as a common carrier for loss and damage to that personal property. (Id. at 2.) According to the notice of removal, the Carriage of Goods by Sea Act (COGSA), 46 U.S.C. § 30701, preempts all claims under state law for the carriage of goods by sea to or from the ports of the United States in foreign trade and exclusive jurisdiction over plaintiff's claim against Mediterranean lies in federal court. (Id. at 2-3.)


I. Arguments of the Parties

In moving for remand, plaintiff argues that he never signed a contract or a Bill of Lading with Mediterranean for the shipment of his belongings overseas and is not suing Mediterranean as a "common carrier." (Mot. for Remand at 3-4.) Rather, plaintiff contends that his claim against Mediterranean is based upon professional negligence, causing financial loss and infliction of emotional distress all based on his allegation that Mediterranean shipped his stolen belongings overseas based on a contract entered into by Charles Boateng purportedly on plaintiff's behalf even though Mediterranean had been informed that the goods in question were, in fact, stolen. (Id. at 9-10.) Plaintiff denies that he is seeking relief under COGSA and professes he has alleged only claims under California law based on his allegations that Mediterranean failed to take reasonable action to return his stolen property to him after they were contacted by law enforcement and himself. (Id. at 9-10, 19.) Plaintiff concludes that defendant Mediterranean has not met its burden of establishing that the removal was proper since all ambiguities are to be resolved in favor of remand to the state court. (Id. at 25-29.)

Defendant Mediterranean opposes the motion to remand, arguing that plaintiff's claim against it is clearly preempted by COGSA. In this regard, Mediterranean contends that plaintiff admits he instructed a shipping agent to arrange for the transportation of his vehicle and its contents overseas to Uganda but claims that he was "conned" by the shipping agent who had the goods diverted to Tanzania. (Opp'n at 3.) Mediterranean points to plaintiff's complaint filed in state court which identifies Mediterranean as a "common carrier" that failed to inspect and verify ownership of the cargo and failed to take reasonable steps to return plaintiff's property to him. (Id.) (citing Compl. at ¶¶ 48, 50-52). Mediterranean also points to the November 5, 2006 Bill of Lading for the shipment in question which reflects that the container was to be loaded on board in Houston, Texas and discharged at the port of Dar Es Salaam, Tanzania with the consignee and party to notify listed as plaintiff Arthur Diamond. (Id.) (citing Ruiz Decl. (Doc. No. 21), Exs. 1 and 4).*fn3 In light of the Bill of Lading, Mediterranean contends that all of its rights and liabilities in connection with the shipment are governed by COGSA regardless of whether plaintiff or his purported agent was the signatory to the Bill of Lading. (Id. at 4.) According to Mediterranean, the total preemptive effect of COGSA provides an exception to the well-pleaded complaint rule and plaintiff cannot avoid removal to federal court simply by omitting from his complaint reference to federal law or by claiming to rely solely on state law in advancing his claims. (Id. at 5.)

II. Analysis

The federal removal statute permits the removal from state court to federal court of cases that might have been filed in federal court originally. See 28 U.S.C. § 1441(a). The burden of establishing federal jurisdiction is on the party seeking removal, and the removal statute is strictly construed against removal jurisdiction. Luther v. Countrywide Home Loans Servicing LP, 533 F.3d 1031, 1034 (9th Cir. 2008); Prize Frize Inc. v. Matrix Inc., 167 F.3d 1261, 1265 (9th Cir. 1999); Emrich v. Touche Ross & Co., 846 F.2d 1190, 1195 (9th Cir. 1988); see also California ex rel. Lockyer v. Dynegy, Inc., 375 F.3d 831, 838 (9th Cir. 2004). "If there is any doubt as to the right of removal in the first instance, federal jurisdiction must be rejected." Duncan v. Stuetzle, 76 F.3d 1480, 1485 (9th Cir. 1996); Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). If at any time prior to judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. 28 U.S.C. § 1447(c).

In opposing remand, defendant Mediterranean relies to a substantial degree upon the decision in Continental Insurance Co. v. Kawasaki Kisen Kasha, Ltd., 542 F. Supp. 2d 1031 (N.D. Cal. 2008). That case involved a state court action brought by an insurance company against the defendant shipping company for damage to cargo under a bill of lading for the seaborne carriage of plums from Oakland, CA to Hong Kong. 542 F. Supp. 2d at 1032-33. The defendant removed the action to federal court asserting that the controversy was governed by COGSA. Plaintiff then moved to remand the action to state court. The district court found that there was no binding authority addressing the question of whether COGSA completely preempts state law and recognized that there was a split among those courts to have addressed the issue. Id. at 1034. The district court concluded as follows:

This order will follow the Eleventh Circuit's decision in Polo Ralph Lauren, L.P. and hold that COGSA provides an exclusive remedy and therefore completely preempts state law. First, the text of COGSA implies that Congress intended to supersede other laws, thereby providing an exclusive remedy. Second, COGSA sets forth the kind of comprehensive regulatory scheme that the Supreme Court found to provide an exclusive remedy in Beneficial National Bank v. Anderson, 539 U.S. at 10, 123 S.Ct. 2058. Third, the Supreme Court's recent opinion in Norfolk Southern Railway Co. v. Kirby makes clear that state law must yield to COGSA where it applies. 543 U.S. 14, 28-29, 125 S.Ct. ...

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